MILLIONS of buy now, pay later customers are set to see a huge change that could impact their finances.
Shoppers using the buy now, pay later (BNPL) service Zilch will soon see their transactions logged on their credit reports.
It means that for the first time, other lenders can see this type of borrowing on their record.
And that might have an affect on your ability to get a mortgage or a credit card in some cases.
The business said it will start sharing this information with credit reference agencies (CRAs) in the next 30 days.
Customers will be told about the change via email and in-app notifications, Zilch told The Sun.
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It added that it will be advising its three million customers that their buy now, pay later activity can impact their credit score.
Using credit responsibly, like using a credit card and paying off the balance each month, helps build your credit score.
But shoppers using BNPL are missing out on this because it doesn’t show up.
Philip Belamant, CEO and co-founder of Zilch said he hopes that customers who make payments on time will now be able to improve their credit score by using the service.
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He said: “Zilch is committed to not only responsibly providing affordable, interest-free credit, but also to helping customers to build their credit profiles without needing to take out a credit card or other high-cost revolving credit product.”
Unlike traditional borrowing, such as credit cards, BNPL is interest-free.
But it does have risks, with charities and experts warning that some customers can end up in unaffordable debt.
Andrew Hagger, Personal Finance Expert from Moneycomms.co.uk said: “For those who fail to make repayments on time it will have a negative impact on their score and ability to take out new finance in the future, so BNPL finance should not be taken lightly but should be viewed as just as important of making credit card and loan repayments on time.”
The UK’s Financial Conduct Authority is expected to tighten the lending rules for BNPL companies later this year.
BNPL firms say they welcome regulation as they want to support their customers.
Last year, TransUnion, one of the UK’s three major credit reference agencies, said lenders can now see how many buy now, pay later accounts somebody has, and how they manage their payments.
Which BNPL firms share your data with credit reference agencies?
The Financial Conduct Authority does not currently have any rules that force BNPL firms to share customer purchases with credit reference agencies.
And so whether your BNPL purchases appear on your credit report will depend on whether the company you made the purchase with is sharing information with credit reference agencies.
Laybuy works with credit reference agencies and conducts credit checks on all customers.
It shares data with Experian and Credit Kudos.
Klarna began reporting UK consumer purchases paid on time, late payments and unpaid purchases for Pay in 30 and Pay in 3 orders made on or after June 1, 2022 to both Experian and TransUnion.
Clearpay does not currently report BNPL transaction data to any credit reference agencies.
How to cut the cost of your debt
If you’re in large amounts of debt it can be really worrying.
Make sure you check your bank balance on a regular basis.
This is because knowing your spending patterns is the first step to managing your money
If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
If you have more than one credit card. and can’t pay them off in full each month, prioritise the most expensive card.
If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don’t pay
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If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further
Groups like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]